Leasehold Reform Act 1967 — Enfranchisement — Application for enfranchisement by lessees of a cottage held for a term of 99 years from December 1981 — Difficulties and complications faced by applicants in seeking to have the title to the freehold vested in them — Entanglement with provisions of trust for sale — Dispositions requiring consent of individual who wished to defeat applicants’ claim to enfranchisement — Applicants’ rights saved by section 23 of the 1967 Act — Appeal from decision of county court judge who had upheld the applicants’ submissions
entitlement of the applicants to acquire the freehold under the 1967 Act was
admitted by both the freeholders and concurrent lessees — The difficulties and
obstruction encountered by the applicants arose from a transfer in 1985 which
brought the cottage within the provisions and restrictions of a family
settlement and trust for sale — The result was that the vesting of the title to
the freehold in the applicants required the appointment of an additional
trustee of the trust for sale and the consent of the present appellant, Mr
Julian Byng — Mr Byng, who admittedly wished to defeat the enfranchisement,
refused to co-operate in the fulfilment of either condition — The applicants
sought a declaration under section 20 of the 1967 Act that they were entitled
to acquire the freehold of the cottage — The county court judge, before whom
the matter came in the first instance, decided that, by virtue of section 23(1)
of the 1967 Act and section 30 of the Law of Property Act 1925, the refusal of
Mr Byng to co-operate could be overcome; and he made declarations in favour of
the applicants — Mr Byng appealed
Appeal upheld the decision of the county court judge but on somewhat different
grounds — It was clear that the 1985 transfer was executed with the definite
intention of rendering the statutory contract under the 1967 Act incapable of
effective completion — The provisions in the transfer which made the exercise
of the trust for sale and the appointment of a new trustee dependent on the
concurrence of Mr Byng were in conflict with section 23(1) of the Act — That
subsection rendered void any agreement which purported to exclude or modify a
right to acquire the freehold or an extended lease under the Act — The judge
below was, however, in error in relying on section 30 of the Law of Property
Act 1925 as a method of implementing the acquisition of the freehold; the
applicants were not ‘persons interested’ under that section — This did not mean
that the court was powerless to secure the implementation of the applicants’
statutory rights — The consent of Mr Byng could be dispensed with in
consequence of section 23 of the 1967 Act and the appointment of an additional
trustee was unnecessary — The court could make a direct order that the
freeholders execute a transfer of the title in favour of the applicants and
that this disposition be registered — They would thus be registered as
proprietors of the freehold and the payment of the proceeds of sale into court
would effectually exonerate them — Appeal dismissed but judge’s order varied
The following
cases are referred to in this report.
Bain v Fothergill (1874) LR 7 HL 158, HL
Craven’s
Estate, Re; Lloyds Bank Ltd v Cockburn (No 2)
[1937] Ch 431
Haslemere
Estates Ltd v Baker [1982] 1 WLR 1109;
[1982] 3 All ER 525
Johnson v Moreton [1980] AC 37; [1978] 3 WLR 538; [1978] 3 All ER
37; (1978) 37 P&CR 243; [1978] EGD 21; 247 EG 895, [1978] 2 EGLR 1, HL
Joseph v Joseph [1967] Ch 78; [1966] 3 WLR 631; [1966] 3 All ER
486, CA
Midland
Bank plc v Pike [1988] 2 All ER 434
Property
& Bloodstock Ltd v Emerton [1968] Ch 94;
[1967] 3 WLR 973; [1967] 3 All ER 321, CA
Stevens v Hutchinson [1953] Ch 299; [1953] 2 WLR 545; [1953] 1 All
ER 699
Wentworth
Securities Ltd v Jones [1980] AC 74; [1979]
2 WLR 132; [1979] 1 All ER 286, (1978) 38 P&CR 77, HL
This was an
appeal by Julian Byng (Proma Ltd taking no part in the appeal) from the
decision of Judge Goldstone, at Barnet County Court, in favour of Ian Andrew
Rennie and his wife, Denise Julia Rennie, on their application under section 20
of the Leasehold Reform Act 1967 for a declaration of their entitlement to
acquire the freehold of Ganwick Cottage, Ganwick Corner, Great North Road,
Potters Bar.
Leolin Price
QC and Miss Sonia Proudman (instructed by Farrer & Co) appeared on behalf
of the appellant; Quinton Iwi (instructed by Percy Short & Cuthbert)
represented the respondents.
Giving the
decision of the court, SLADE LJ said: This is the judgment of the court
on an appeal by Mr Julian Byng from an order of His Honour Judge Goldstone made
in the Barnet County Court on November 1 1988. The hearing of the appeal began
on July 3 1989, but then had to be adjourned due to the illness of a member of
the court. The hearing was completed on November 9 1989, when judgment was
reserved.
The case
arises out of an application for enfranchisement under the Leasehold Reform Act
1967 (‘the 1967 Act’) concerning a property known as Ganwick Cottage, Ganwick
Corner, Great North Road, Potters Bar (‘the cottage’). It will be convenient to
state the history of the matter more or less chronologically.
On December 29
1967 a settlement (‘the Byng settlement’) was executed by Mr Byng of the one
part and Wentworth Securities Co Ltd of the other part.
By a lease
dated April 1 1982 (‘the 1982 lease’) Wrotham Park Settled Estates (‘Wrotham’)
granted a lease of the cottage to Mr Ian Rennie and his wife, Mrs Denise
Rennie, the respondents to this appeal, for a term of 99 years from December 25
1981. The rent was £50 per annum, but a substantial premium was paid and the
lease contained a rent review clause.
By a deed of
appointment dated May 24 1982 (‘the 1982 deed’) Mr K W Fryers and Mr D J
Morgan, the then trustees of the Byng settlement (‘the Byng trustees’) executed
a power conferred on them by the Byng settlement in favour of certain of the
beneficiaries. They did so by directing that certain property specified in the
Schedule to the 1982 deed (‘the appointed fund’) should be transferred to Proma
Ltd (‘Proma’) upon the trusts therein declared. These trusts provided, inter
alia, for the transferred property to be held on trust for sale, any such
sale to be subject to the written consent of Mr Byng during his lifetime (see
clause 8). The 1982 deed (clause 16) further provided that the statutory power
of appointing new or additional trustees as therein modified should be
exercisable by Mr Byng during his lifetime. The Byng settlement and the
appointed fund did not at that time include the cottage.
By a transfer
of March 7 1985 (‘the 1985 transfer’), executed in consideration of a
‘leaseback’ of the same date, Wrotham transferred to Proma the cottage
expressly subject to and with the benefit of the 1982 lease. The 1985 transfer
provided by clause 2 that Proma should hold the cottage upon trust for sale and
the net proceeds of any such sale and the net rents and profits until sale upon
the trusts of the 1982 deed. It further provided, by clause 3, that the trust
for sale should be exercisable only with the consent of Mr Byng during his
lifetime, and after his death with the consents of such persons as were
specified in that clause. Clause 4 incorporated, inter alia, clause 16
of the 1982 deed. By clause 7, Proma applied to the registrar to enter
restrictions at HM Land Registry substantially in the form set out below.
On March 7
1985, Proma executed the contemplated leaseback in favour of Wrotham in respect
of the cottage for a term of 99 years plus one day, from December 25 1981, at a
peppercorn rent.
On March 18
1985, the title of Proma as proprietor was registered at H M Land Registry.
Restrictions were registered in the proprietorship register in the following
terms:
2. Except
under an Order of the registrar no disposition by the proprietor of the land or
any part thereof is to be registered during the lifetime of [Mr Byng] without
the [sic] consent or after his death without the consent required by Clause 3
of [the 1985 Transfer].
3. No
disposition by one proprietor of the land (not being a trust corporation) under
which capital money arises is to be registered except under an order of the
Registrar or of the Court.
Proma is not a
trust corporation.
On February 21
1986, Mr and Mrs Rennie, in purported exercise of their rights under the 1967
Act, gave notice that they, as tenants of the cottage, desired to have the
freehold of the cottage.
On April 15
1986, solicitors acting for Proma gave notice to Mr and Mrs Rennie refusing to
admit their right.
On January 21
1987, Mr and Mrs Rennie issued an application pursuant to section 20 of the
1967 Act, seeking a declaration that they are entitled by virtue of the
provisions of Part I of the 1967 Act to acquire the freehold of the cottage.
This
application was followed by an answer filed on March 4 1987 by solicitors
acting for Proma. It is unnecessary to refer to the contents of this answer.
For, following its delivery, solicitors acting for Proma wrote to the
applicants’ solicitors an undated letter in the following terms, which
sufficiently explains the nature of the substantial dispute between the
parties:
Further to our
previous correspondence, we have been discussing this matter further with our
Clients.
We are now
instructed to inform you that, notwithstanding the point raised in our Answer
that your Clients’ leaseholders’ claim did not comply with the requirements of
paragraph 6(2) of Schedule 3 to the Leasehold Reform Act 1967, they are
prepared to concede that your Clients are entitled as against both Proma Ltd,
as freeholder, and Wrotham Park Settled Estates, as concurrent lessee, to
enfranchise under the Act. However, this concession is without prejudice to the
other points raised both in our reply to your Clients’ leaseholders’ claim and
in the Answer to your Clients’ Originating Application that:
1. Proma Ltd being a single trustee not being
a trust corporation cannot give a good receipt for the purchase money and,
therefore, cannot convey a good title to your Clients, the interest of the
beneficiaries under the relevant settlement not being overreached and
2. Your Clients would not be able to have a
transfer of the freehold registered without the consent of Mr Julian Byng by
virtue of a restriction on the register of the freehold title.
Our Clients
are, therefore, willing to execute a transfer in favour of your Clients but
Proma Ltd is not willing to appoint an additional trustee and it is our view
that the Court has not power under Section 30 Law of Property Act 1925 to
appoint an additional trustee for sale for the purpose of giving effect to the
statutory contract arising under the Leasehold Reform Act 1967. We would also
add that Mr Byng is not willing to give his consent to registration of a
transfer of the freehold title . . .
In these
circumstances, the applicants on June 30 1987 amended their application by
joining Mr Byng as an additional respondent and asking that pursuant to the
declaration already sought the following further orders be made:
(1) That it be declared, pursuant to the
provisions of the Law of Property Act 1925 section 30 that the consent of [Mr]
Byng to the transfer of the freehold of [the Cottage] into the names of the
Applicants, be dispensed with.
(2) That Christopher William Short and William
Osborn Boyes . . . be appointed as additional trustees of the Trust for Sale
referred to in clause 2 of [the 1985 transfer] pertaining to the freehold title
to [the Cottage] . . .
(3) That it be declared that the trustees of the
Trust for Sale aforesaid are entitled to transfer the freehold interest in [the]
Cottage, notwithstanding the absence of the consent of [Mr] Byng to such
transfer and to give to the Applicants a good discharge for the sum payable in
respect of the freehold interest.
(4) That the Chief Land Registrar be directed to
register the transfer of [the] Cottage, aforesaid, into the names of the
Applicants, notwithstanding the absence of the consent of [Mr] Byng to the said
transfer.
(5) That the form of the transfer be agreed
between the parties and in default of agreement be settled by the Registrar of
this Court . . .
By an answer
dated July 31 1987 the attitude of Mr Byng was explicitly stated. Having
summarised matters relating to the title to the property and having pointed out
that, under the terms of the relevant instruments, Mr Byng during his lifetime
was the only person entitled to appoint a new trustee of the trust for sale of
the cottage, the answer continued as follows:
(6) In the premises:
(i) a transfer of the property to the Applicants
by Proma, as a single trustee for sale (not being a trust corporation) would
not overreach the beneficial interests under the Settlement;
(ii) a transfer of the property to the Applicants
by Proma without my consent is not registrable at H M Land Registry.
(7) I decline (i) to appoint an additional
trustee or additional trustees of the said trusts and (ii) to consent to the
registration of the transfer of the property sought by the Applicants.
(8) The Applicants are not entitled to apply to
the Court for the appointment of an additional trustee or additional trustees
as they are not persons interested under the said trusts. Further, or
alternatively, such a trustee or trustees should not be appointed as it is not
in the interests of the beneficiaries of the Settlement.
(9) The Applicants are not entitled to apply to
the Court for an order under section 30 of the Law of Property Act 1925 that my
consent to the registration of a transfer to the Applicants be dispensed with
because:
(i) that section is by its terms inapplicable to
a disposition under the Leasehold Reform Act 1967;
(ii) the Applicants are not ‘persons interested’
entitled to apply to the Court within the meaning of that section.
(10) Accordingly I deny that the Applicants are
entitled as against me to the relief they claim or any relief.
Before the
judge it was common ground that, subject to the points made in Mr Byng’s
answer, the applicants had a statutory right to enfranchisement of the cottage.
He concluded that, notwithstanding these points, a proper method was available
to the court for achieving the vesting of the freehold in the applicants. The
route which led him to his conclusion may be summarised as follows:
(A) section 23(1) of the 1967 Act provides:
Except as
provided by this section, any agreement relating to a tenancy (whether
contained in the instrument creating the tenancy or not and whether made before
the creation of the tenancy or not) shall be void in so far as it purports to
exclude or modify any right to acquire the freehold or an extended lease or
right to compensation under this Part of this Act, or provides for the
termination or surrender of the tenancy in the event of a tenant acquiring or
claiming any such right or for the imposition of any penalty or disability on
the tenant in that event.
(B) An agreement is capable of falling within
section 23(1) of the 1967 Act, even though the tenant is not a party to it.
(C) So much of clause 3 of the 1985 transfer as
provided that the trust for sale upon which Proma holds the freehold shall be
exercisable only with the consent of Mr Byng during his lifetime, and after his
death as therein specified, represented an agreement relating to a tenancy
purporting to exclude or modify any right of Mr and Mrs Rennie to acquire the
freehold and was therefore void under section 23(1).
(D) Mr and Mrs Rennie are ‘persons interested’
within section 30 of the Law of Property Act 1925, which provides:
If the
trustees for sale refuse to sell or to exercise any of the powers conferred by
either of the last two sections, or any requisite consent cannot be obtained,
any person interested may apply to the court for a vesting or other order for
giving effect to the proposed transaction or for an order directing the
trustees for sale to give effect thereto, and the court may make such order as
it thinks fit.
The learned
judge accordingly made declarations in the sense of (C) and (D) above, and
further made orders in the following form:
(1) That the restriction registered on the 18th
March 1985 and being entry No 2 in the Proprietorship Register relating to the
property comprised in Title No HD 190961 be set aside
(2) That upon payment into the Barnet County
Court of a sum equal to the price payable under and by virtue of the provisions
of the said Act of 1967 by the Applicants to the 1st Respondent for the
acquisition of the freehold title to the property comprised in Title No HD
190961 all right title and interest of Proma Limited in the property comprised
in the said Title do vest in the Applicants
(3) That upon the Registrar of the Barnet County
Court certifying that the said sum has been paid into Court the Applicants do
produce such certificate and a certified copy of this Order to the Chief Land
Registrar at H M Land Registry for the purpose of procuring the registration of
the Applicants as the proprietors of the freehold property comprised in the
said Title No with title absolute including all rights excepted and reserved to
Wrotham Park Settled Estates by the First Schedule to the said Transfer
(4) That the said sum paid into Court be paid out
upon the Court being satisfied that there are trustees of [The Byng Settlement]
willing and able to give a good receipt for the said sum.
Mr Byng now
appeals to this court from the judge’s order. Proma itself has taken no part in
the appeal. In the court below, Mr Byng and Proma appeared by the same counsel.
The
grounds of appeal
In their
skeleton argument for this court, counsel for Mr Byng amplified the submissions
as to the basic legal position as follows:
Under and by
virtue of the 1985 Transfer, Proma holds the legal estate in [the Cottage],
subject to a trust for sale upon the trusts of the 1982 Deed. It is unable to
transfer title to [Mr and Mrs Rennie] free from the beneficial trusts of the
1982 Deed because
(a) Mr Byng’s consent is required (see Clauses 3
and 7 of the 1985 Transfer and Clause 8 of the 1982 Deed) and he has withheld
consent (his view being that his power to give or withhold consent is not fiduciary
and he chooses not to consent; but also that it is in the best interests of the
trust that consent should be withheld,
(b) Mr Byng is the person with power to appoint
new or additional trustees of the [1985] Transfer (see Clause 4 of the 1985
Transfer, Clause 16 of the 1982 Deed, section 35(1) Trustee Act 1925, section
24(1) Law of Property Act 1925) and he refuses to appoint an additional trustee.
(Mr Byng’s view is that the appointment of an additional trustee would not
serve any interest of the trust, but would be a disservice to the trust).
[Except where the trustee is a trust corporation] the receipt of two trustees
is necessary to overreach the beneficial trusts on sale (section 27(2) of the
Law of Property Act 1925, as amended).
The 1985
transfer, it should be said, was executed by Mr Byng as a director of Wrotham
and by his wife, Mrs Eve Byng, as secretary. The judge observed (at p 5 of his
judgment):
. . .
throughout it has never been suggested by Mr Price that the retention by Mr
Byng of the right of veto, because that is what it is, and need for his consent
was other than to defeat the Leasehold Reform Act. What Mr Price urged upon me
and I quote him it was that was something laudable and indeed he may be right
(although perhaps Parliament would not go along with him) but that was
something laudable because he wanted to preserve for his heirs that which would
come to them on the defeating of what in my judgment was the clear intention of
Parliament [sic].
In our
judgment, on the evidence before the court, the inference is irresistible that
the 1985 transfer was executed with the intention of rendering the statutory
contract, which would arise if and when Mr and Mrs Rennie gave notice of their
desire to enfranchise, incapable of effective completion, that is to say
incapable for the very reasons set out so clearly in the skeleton argument of
Mr Byng’s counsel. We say this in particular because:
(1) the 1985 transfer
comprised nothing but the cottage;
(2) it is hard to believe
that the simple purpose of the 1985 transfer was to benefit the beneficiaries
under the 1982 deed by subjecting the cottage to the trusts of that deed,
bearing in mind that it was to be immediately followed by a leaseback for 99
years and a day at a peppercorn rent in favour of Wrotham;
(3) the body chosen by Mr
Byng and his fellow directors of Wrotham as the transferee of the freehold
reversion to the cottage was (a) a trustee, (b) a sole trustee, and (c) a
corporation not being a trust corporation, thus disqualified from giving
effective receipts for any money paid by a purchaser;
(4) no affirmative evidence
was adduced before the judge to rebut the very obvious inference which we have
mentioned.
On the first
day of the hearing in July, this court made it clear that it was proposing to
draw such inference, and made it equally clear early in the morning of the
hearing on November 7 1989. In mid-afternoon on November 7, Mr Leolin Price QC,
on behalf of Mr Byng (as we understand with a view to seeking to rebut this
inference), applied for leave to adduce further evidence relating to the title
of Wrotham itself at the date of the 1985 transfer. We did not think it right to
accede to this application because:
(a) the evidence could have
been readily available in the court below but was not put before it;
(b) it is a fair assumption
that, at least at the time of their appearance in the county court, Mr Byng’s
leading and junior counsel took the view that such evidence would not assist
his case on the section 23 point; and
(c) in any event, the
application was made far too late and, if granted, might well have necessitated
a further adjournment so as to enable the respondents’ legal advisers to make
further investigations and inquiries.
The two
substantial grounds of appeal argued before this court are summarised in paras
1 and 2 of the notice of appeal as follows:
1 The learned Judge was wrong in law in holding
that Clause 3 of the said Transfer registered on 18th March 1985 comprised an
agreement invalidated by Section 23 of the said Act of 1967 relating to a
tenancy which purports to exclude or modify any right to acquire the freehold
of the property . . .
2 The learned Judge was wrong in law in holding
that by virtue of the right granted to them by the said Act of 1967 to acquire
the freehold of the property the Applicants are persons interested within the
meaning of Section 30 Law of Property Act 1925 entitling them to apply to the
Court for an order vesting the property in them . . .
By a second
respondents’ notice, for which this court gave leave, Mr and Mrs Rennie contend
that the judgment be affirmed on the additional grounds that:
the agreement
recorded in the transfer of 7th March 1985 was void in so far as it
incorporated therein provision that any new trustee might be appointed only by
[Mr Byng] and thereby excluded or modified the right of the applicants to
acquire the freehold interest in Ganwick Cottage by precluding the first
respondent giving a due and proper receipt for the sum to be paid on the
acquisition of the purchase of the freehold interest therein.
The first
ground of appeal
Throughout the
consideration of the first ground of appeal we bear in mind two points, of
which the second was particularly stressed by Mr Price. First, while some might
regard the transactions of 1985 as an ingenious device,
to describe
what was done as an ingenious device is irrelevantly pejorative: a man is
entitled to avoid a claim against his prima facie legal rights by
adoption of a genuine disposition of those rights:
(see Wentworth
Securities Ltd v Jones [1980] AC 74 at p 113 per Lord Russell
of Killowen). (In that case two companies, one of which was Wrotham itself, had
entered into another scheme which Lord Diplock (at p 105) described as having
been devised with ‘care and ingenuity’. The effect of the scheme was
substantially to enhance the price payable by the resident tenant on acquiring
the freehold pursuant to his rights under the 1967 Act. The House of Lords held
in effect that section 23 of that Act had no application on the grounds that
the provision under attack ‘may modify the terms upon which the tenant
may acquire the freehold, but does not modify the right itself’: (see at p 113
C-D per Lord Russell)).
Second, if it
is to strike down the provisions of the 1985 transfer under attack, it will not
suffice that the court may consider that there is a gap in the 1967 legislation
which the legislature would have
v Jones (supra) and Johnson v Moreton [1980] AC 37). It
must be satisfied that the provisions fall fairly and squarely within section
23 (1) on its true construction.
In support of
the first ground of appeal, Mr Price put forward a number of submissions, with
which we will deal in turn, though not necessarily in the order in which they
were presented.
First, he
submitted that no relevant ‘agreement’ within the meaning of the 1967 Act had
been demonstrated on the evidence. This point is, in our judgment, without
substance. The 1985 transfer, executed as it was in consideration of a
leaseback of the same date, plainly gave effect to an agreement between Wrotham
and Proma. Second, he submitted that, even if there were a relevant
‘agreement’, it did not ‘relate to’ the tenancy of Mr and Mrs Rennie within the
meaning of section 23(1). In his submission, an agreement ‘relates to a
tenancy’ within this meaning only if it deals with or touches directly the
terms or duration of the tenancy. In our judgment, this is too narrow a
construction of the relevant phrase, which is not ‘any agreement between
landlord and tenant’, but the wider phrase ‘any agreement relating to a
tenancy’. The House of Lords in the Wentworth Securities case, while not
deciding the point, said nothing in support of the narrow view of the Lands
Tribunal that an agreement ‘relating to the tenancy’ must be one to which the
tenant must be a party (see at p 114 D per Lord Russell). In response to
the first and second of Mr Price’s submissions in this context, we would adopt
what was said by Stephenson LJ in the Court of Appeal in the Wentworth
Securities case (sub nom Jones v Wrotham Park Estates) [1980]
AC 74 at p 91:
I see no
reason to exclude from section 23(1) an agreement made between one party to the
lease and a third party if it relates to the tenancy and either purports to
exclude or modify the statutory rights or provides for any of the matters
specified in the subsection . . .
As the
tenancy with which the whole Act, including this section, is concerned is a
long tenancy at a low rent from which a tenant with the other qualifications
required by section I derives the rights conferred on him by the Act, any
agreement which affects or bears upon any of those statutory rights of a tenant
in my judgment relates to his tenancy.
In the present
case the arrangements made between Wrotham and Proma in 1985 involved (a) a
transfer of the freehold of the cottage (and nothing but the cottage) which was
expressed to be subject to and with the benefit of the 1982 lease; (b) a
leaseback of the cottage by Proma in favour of Wrotham; (c) the substitution of
Proma (albeit only for a moment of time before the leaseback was executed) as
the landlord of Mr and Mrs Rennie.
In our
judgment, for this court to hold in these circumstances that the 1985
arrangements involved no ‘agreement relating to the tenancy’ would be to
distort the ordinary meaning of words.
Next, Mr Price
submitted that in the context of section 23(1) the word ‘purport’ means ‘is
expressed’, and accordingly that, even if there were an agreement of the
relevant nature, it did not ‘purport‘ to exclude or modify any right of
Mr and Mrs Rennie to acquire the freehold, in the relevant sense. He referred
us to the primary meaning ascribed to the word ‘purport’ in the Shorter
Oxford Dictionary:
To have as
its purport, bearing, or tenor; to convey to the mind; to bear as its meaning;
to express, set forth, state; to mean, imply.
The word
‘purport’ is a word capable of bearing different meanings in different
contexts. One of these alternative meanings given in the Shorter Oxford
Dictionary is ‘to mean, intend, purpose’. In Joseph v Joseph
[1967] Ch 78 this court had to consider its meaning in the context of section
38(1) and (2) of the Landlord and Tenant Act 1954, which, so far as material,
provided as follows:
38. — (1) Any agreement
relating to a tenancy to which this Part of this Act applies . . . shall be
void in so far as it purports to preclude the tenant from making an application
or request under this Part of this Act or provides for the termination or the
surrender of the tenancy in the event of his making such an application or
request or for the imposition of any penalty or disability on the tenant in
that event.
(2) . . . any agreement . . . which purports to
exclude or reduce compensation under the last foregoing section shall to that
extent be void . . .
This court
rejected an argument that the word ‘purports’, as used in section 38(1) and
(2), meant ‘professes’. It held that it meant ‘has the effect of’ (see at p 87 per
Lord Denning MR, at p 88 per Diplock LJ and at pp 92-93 per
Russell LJ, who observed that the meaning ‘to have as its effect’ is a suitable
meaning ‘when the statute is avoiding an agreement and therefore is presumably
aimed at its effect’).
In our
judgment, the word ‘purports’ should be given a similar sense in the context of
section 23(1) of the 1967 Act. This does not mean that the court will be required
to have regard to events subsequent to the relevant agreement in order to
determine whether ‘it purports to exclude or modify any right to acquire the
freehold’. Mr Price, by examples, well illustrated the difficulties of any such
approach or of reading the word ‘void’ as merely meaning ‘voidable’. The
legislature cannot, we think, have contemplated that the relevant part of the
agreement should be valid in some circumstances and void in others. The
relevant part of it, if it is void at all, must be void ab initio; one
must look at the position as at the time when the agreement was made. In our
judgment, the phrase ‘purports to exclude or modify any right to acquire the
freehold’ means ‘would, but for its avoidance by the subsection, exclude or
modify any right to acquire the freehold‘. Mutatis mutandis this
construction precisely corresponds with the construction of the corresponding
phrase accepted by Diplock LJ in Joseph v Joseph (supra) at p 90,
and, we think, implicitly by the other two members of the court.
The two
provisions of the 1985 transfer under attack are (a) so much of clause 3 as
provided that the trust for sale upon which Proma holds the freehold of the
cottage shall be exercisable only with the consent of Mr Byng during his
lifetime; and (b) so much of clause 4 as incorporated clause 16 of the 1982
deed and thereby provided that any new trustee might be appointed only by Mr
Byng. We will refer to (a) and (b) respectively as the first and second of ‘the
disputed provisions’. Thus, the crucial question, in our judgment, becomes:
would either or both of the disputed provisions, but for their avoidance by
section 23(1), exclude or modify any right of Mr and Mrs Rennie to acquire the
freehold?
We believe
that the substance of Mr Price’s argument on this point may be fairly
summarised in the following propositions:
(1) By virtue of section 1(1) of the 1967 Act,
Part I of the Act has the effect of conferring on a tenant of a leasehold
house, occupying the house as his residence, a right to acquire on fair terms
the freehold.
(2) The scheme of the 1967 Act could have been,
but is not, to create such rights of enfranchisement through a compulsory
purchase procedure. Instead, it does so merely through the medium of a
statutory contract. Thus, section 5(1), so far as material, provides that where
a tenant of a house has the right to acquire the freehold
the rights
and obligations of the landlord and the tenant arising from the notice shall
inure for the benefit of and be enforceable against them, their executors,
administrators and assigns to the like extent (but no further) as rights and
obligations arising under a contract for a sale or lease freely entered into
between the landlord and tenant.
Section 5(3)
provides that:
In the event
of any default by the landlord or the tenant in carrying out the obligations
arising from any such notice, the other of them shall have the like rights and
remedies as in the case of a contract freely entered into.
(3) Under that statutory contract, Proma is bound
to make to the tenants a grant of the cottage
for an estate
in fee simple absolute, subject to the tenancy and to tenant’s incumbrances but
otherwise free from incumbrances (section 8(1)).
(4) However, by virtue of section 10(1):
the landlord
shall not be bound to convey to the tenant any better title than that which he
has or could require to be vested in him.
(5) Proma is willing to execute such a transfer
to Mr and Mrs Rennie as is within its power. However, such a transfer would not
constitute a grant capable of registration without Mr Byng’s consent. The
position is the same as would be the position under a contract freely entered
into between Proma and Mr and Mrs Rennie. Proma’s inability to obtain the
consent of Mr Byng is a defect of title which prevents the effective completion
of the statutory contract. It will or may expose it to a claim for damages,
though such damages will be no more than nominal because of the rule in Bain
v Fothergill (1874) LR 7 HL 158 (the recent statutory abolition of which
is not retrospective). However, the disputed provisions do not prevent the
statutory contract from coming into existence (compare Property &
Bloodstock Ltd v Emerton [1968] Ch 94).
(6) In these circumstances, it cannot be said
that either or both of the disputed provisions would, but for their avoidance
by section 23(1), exclude or modify the statutory right of Mr and Mrs Rennie to
acquire the freehold; this statutory right still survives intact.
We have been
impressed, but ultimately not convinced, by these
short one, and our answer to it is equally short.
In our
judgment, any provision of any agreement which, but for its avoidance by
section 23(1), would have the effect of rendering specifically unenforceable
the statutory contract between him and his landlord, which would arise if and
when in the future he exercised his statutory right to serve a notice of his
desire to have the freehold pursuant to the 1967 Act, ‘excludes or modifies’
such right within the meaning of section 23(1). The situation in such a case is
quite different from that considered in the Wentworth Securities case,
where the relevant agreement merely had the effect of enhancing the price which
the tenant had to pay on the exercise of the right; in that case the right
itself remained wholly intact.
We have to
consider the question before us in the absence of directly relevant authority
to guide us. In our judgment, however, the first of the disputed
provisions of the agreement between Wrotham and Proma embodied in the 1985
transfer purported at the very least to ‘modify’ the statutory right of Mr and
Mrs Rennie to acquire the freehold because, but for the avoidance of that
provision, it would prevent Mr and Mrs Rennie from specifically enforcing that
statutory right (other than by a claim to nominal damages). We are not prepared
to hold that an agreement does not purport to ‘modify’ a right if (but for its
avoidance) it renders that right unenforceable in any manner other than by a
claim for nominal damages. So to hold merely because the agreement does not
purport to prevent the statutory right from coming into existence would seem to
us inconsistent with both the obvious intention of section 23(1) and its
wording. In our judgment, therefore, the first ground of appeal is ill-founded.
The first of the disputed provisions is void by virtue of section 23(1).
Different
considerations apply to the second of the disputed provisions of the
agreement between Wrotham and Proma embodied in the 1985 transfer. For reasons
which will appear in the next section of this judgment, full effect can, in our
judgment, be given to Mr and Mrs Rennie’s statutory right without declaring
void Mr Byng’s power to appoint new trustees. In our judgment, therefore, in
answer to the submission made in the additional respondents’ notice, section
23(1) does not have the effect of rendering void the second of the disputed
provisions.
The second
ground of appeal
Having held
void so much of clause 3 as provided that the trust for sale upon which Proma
holds the freehold of the cottage shall be exercisable only with the consent of
Mr Byng during his lifetime, the judge still had to consider how best to give
effect to the statutory rights of Mr and Mrs Rennie. The course adopted by him
in the order which he ultimately made is explained in the following passage of
his judgment:
Mr Gaunt
(counsel for Proma) is faced, particularly now I have said the agreement
requiring Mr Byng’s consent is void, with an Act of Parliament which says (in
the circumstances under which he agrees he falls) he should convey. I have no
doubt Mr Iwi’s clients are persons interested under section 30. It may be that
under section 57 Trustee Act 1925 the Court would come to the opinion that it
was expedient to appoint additional trustees who might then make an application
under the Act.
I do not think
that circuitous method is necessary. If I am right that under section 30 the
applicants are entitled to relief I am able to make such order as I think just
to give effect to the vesting of the property into Mr Iwi’s clients’ names.
The order I
should think is most appropriate is that there should be an order that Proma
vest the freehold in the applicants and that the money consideration be paid
into court to be paid out as soon as there are trustees ready willing and able
to give a good receipt. The appointment of such trustees of course will be in
the hands of Proma.
Bearing in
mind their dedicated interest in the beneficiaries no doubt they will quickly
appoint trustees to receive the proceeds of sale.
After the
judge had delivered his judgment, a colloquy took place which is recorded in
the notes of the judgment as follows:
Mr Gaunt,
referring to the judgment, said that he did not say that Proma were not
prepared to appoint an additional trustee. What he said was that they had no
power. The learned judge said that he altered the observation so as to
substitute Mr Byng for Proma.
Mr Price has
submitted that on any footing the judge had no jurisdiction to make an order of
this kind under section 30 of the Law of Property Act 1925 as a means of
implementing the sale. In this context he drew our attention to a number of
authorities. In Stevens v Hutchinson [1953] Ch 299, Upjohn J held
that a judgment creditor appointed as receiver by way of equitable execution of
a debtor’s interest in a house which was held by the debtor and his wife on
trust for sale as tenants in common was not a person interested for the
purposes of section 30. He said (at p 305):
‘a person
interested’, there means, in my view, a person interested in some proprietary
right under the trust for sale, whether as a beneficiary or assignee or
chargee, and does not include a person who may have some personal rights — such
as a judgment creditor who has appointed a receiver.
In Haslemere
Estates Ltd v Baker [1982] 1 WLR 1109 Megarry J held that a person
who has contracted with the trustees of a charity does not thereby become a
‘person interested in the charity’ within the meaning of section 28(1) of the
Charities Act 1960. As he pointed out (at p 1122):
Many a person
may be interested in the property of a charity without, for this purpose, being
interested in the charity.
In Midland
Bank plc v Pike [1988] 2 All ER 434 Mr Edward Nugee QC, following
the principle stated by Upjohn J in Stevens v Hutchinson, held
that a person entitled to a charging order on the share of a co-owner in the
proceeds of sale has a proprietary interest in that share and is a ‘person
interested’ who is entitled to apply for an order for sale of the land pursuant
to section 30.
In the present
case, Mr and Mrs Rennie, while having an interest in the cottage itself, have
no proprietary interest under the trust for sale affecting it. Differing from
the learned judge on this point, we therefore do not think that they are
‘persons interested’ within the meaning of section 30 of the Law of Property
Act 1925 who have a locus standi to make an application under that
section. That section, and likewise section 57 of the Trustee Act 1925 referred
to by the judge, are, in our judgment, sections intended for the protection and
benefit of persons who have claims under the relevant trust, not of
persons who have claims against it (see for example Re Beale’s
Settlement Trusts, Huggins v Beale [1932] 2 Ch 15; Re Craven’s
Estate, Lloyds Bank Ltd v Cockburn (No 2) [1937] Ch 431).
However, it
does not, in our judgment, follow that the court is powerless to give practical
effect to Mr and Mrs Rennie’s statutory rights merely because it is unable to
make use of section 30 of the Law of Property Act 1925 or section 57 of the
Trustee Act 1925. The consent of Mr Byng to the sale can and will be dispensed
with, not under section 30 of the former Act, but by virtue of section 23 of
the 1967 Act, which renders void so much of clause 3 of the 1985 transfer as
makes requisite the consent of Mr Byng to any sale. We understand that the
professed attitude of Proma before the judge was that it was willing to execute
a transfer of the cottage in favour of Mr and Mrs Rennie but that it could not
appoint an additional trustee to receive the proceeds of sale since it did not
have the power of appointment.
In our
judgment, the appointment of an additional trustee will not be necessary to
enable Proma to make a good title in favour of Mr and Mrs Rennie, overreaching
the beneficial interests of the persons interested under the trust for sale.
The cottage is registered land. If this court orders that the restriction which
is entry no 2 in the proprietorship register be set aside, and further orders
that Proma execute a transfer of all its right title and interest in the
cottage in favour of Mr and Mrs Rennie and that this disposition be registered,
there will be nothing to prevent the registration of Mr and Mrs Rennie as
proprietors of the freehold. (The restriction which is entry no 3 will not
prevent it.) The effect of such
registration will be to overreach the ‘minor’ interests of the beneficiaries
interested under the trust for sale. If, pursuant to the order of this court,
the proceeds of sale are paid by Mr and Mrs Rennie into court, the payment will
effectually exonerate them (section 203(1) of the Law of Property Act 1925). If
this court’s order further follows the judge’s order in providing that the sum
paid into court be paid out on the court being satisfied that there are
trustees of the Byng settlement willing and able to give a good receipt for
this sum, Mr Byng will presumably effect the appointment of an additional trustee
necessary to enable the money to be paid out of court. If he were not to do so,
it would be open to the beneficiaries interested in the proceeds of sale to
apply to the court under section 41 of the Trustee Act 1925 for the appointment
of an additional trustee.
Subject to
further submissions, we propose in all the circumstances to vary the judge’s
order
(1) by deleting the whole
paragraph of the order which declares that Mr and Mrs Rennie ‘being persons
interested’ within the meaning of section 30 of the Law of Property Act 1925
are entitled to apply to the court for a vesting or other order as therein
mentioned;
(2) by amending para (2) of
the order so as to substitute for the
said Title do vest in the Applicants’, the words ‘Proma Ltd do forthwith
execute in favour of the Applicants a transfer of all its right title and
interest in the property’;
(3) by amending para (3) of
the order so as to read:
That (a) upon
the Registrar of the Barnet County Court certifying that the said sum has been
paid into Court the Applicants do produce such certificate and the
last-mentioned transfer to be executed by or on behalf of Proma Limited and a
certified copy of this Order to the Chief Land Registrar at HM Land Registry
for the purpose of procuring the registration of the Applicants as the
proprietors of the freehold property comprised in the said Title No with title
absolute including all rights excepted and reserved to Wrotham Park Settled
Estates by the First Schedule to the above-mentioned Transfer registered on the
18th March 1985, and (b) thereupon the Applicants be registered accordingly;
(4) by amending para (4) so
as to substitute for the reference to the trustees of the 1967 settlement a
reference to the trusts of the 1985 transfer.
If this course
is followed, the exception specified in the restriction which is entry 3 in the
proprietorship register of the cottage will apply, since the disposition by
Proma as sole proprietor of the land will fall to be registered ‘under an Order
of the Court’.
We would be
willing to hear submissions as to the precise form which this court’s order,
and any variations of the judge’s order, should take. Subject to any such
variations, this appeal will be dismissed.
The appeal
was dismissed with costs; an application for leave to appeal to the House of
Lords was refused.
